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Options
- A
Only 1 and 2 are true
-
Only 2 and 3 are true
Correct answer
- C
Only 1 and 3 are true
- D
All 1, 2 and 3 are true
Why this is the answer
A diversified stock index has a beta of 1 by definition. A beta greater than 1 indicates a riskier investment relative to the market, while a beta of less than 1 indicates a less risky investment. An investment with a beta of 0.8 will typically move 8% when the market moves by 10%. Beta is most commonly used to measure risk in equity schemes, not other types of funds.
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